Think of the web only as a new channel – a different way of putting products and services in front of customers – and you miss the threat and the promise of the Internet, which is that it will utterly change how you do business.
Reasons to start an internet Business
Need convincing that the Web is the place for your business to be? Here are 10 reasons why you have to be online:
- It’s cheap. There is no more inexpensive way to open a business than to launch a web site. While you could spend up to many millions of dollars to get started, low-budget web sites (started with as little as $100) remain viable businesses.
- You cut your order fulfilment costs. Handling orders by phone is expensive. Ditto for mail orders. There’s no more efficient–cheap, fast, accurate–way to process orders than via a web site.
- Your catalogue is always current. A print catalogue can cost big bucks, and nobody wants to order a reprint just to change one price or to correct a few typos. A Web site can be updated in minutes.
- High printing and mailing costs are history. Your customers can download any information you want them to have from your web site. Sure, you’ll still want to print some materials, but lots can be distributed via the web.
- You cut staffing costs. A web site can be a low-manpower operation.
- You can stay open 24 hours daily. And you’ll still get your sleep because your site will be open even when your eyes are closed.
- You’re in front of a global audience. Watch your site log, and you’ll see visitors streaming in from Australia, New Zealand, Japan, South Africa – wherever there are computers and phone lines.
- There are no city permits and no hassles. It could change, but in most parts of the country, small web businesses can be run without permits and with little government involvement. As you expand and add employees, you’ll start to bump into laws and regulations, but it’s certainly nice to be able to kick off a business without first filling out reams of city and state forms.
- There are no angry customers in your face. You can’t ignore unhappy customers in any business; in fact, how well you deliver customer service will go far toward determining how successful you are. But at least with a web business you’ll never have to stand eyeball-to-eyeball with a screamer.
- It’s easy to get your message out. Between your web site and your smart use of e-mail, you’ll have complete control over when and how your message goes out. You can’t beat a web site for its immediacy, and when a site is done well, it’s hard to top its ability to grab and hold the attention of potential customers.
Domains and Hosting
Choosing a Website Host and Domain Names
With your website designed, you need a place to stow it so that visitors can access it –and you have hundreds of choices. Many hosts are free, and few cost more than a few hundred Rands per month. Truth is, setting up your own host – a dedicated computer that’s permanently wired into the net – wastes money and time and, for most small businesses, is a bad idea. Better to outsource hosting to those who specialise in it.
When picking a host, you first and foremost want to know if a host can handle e-commerce activities. Some of the most barebones companies simply aren’t equipped.
Other criteria that are important to most users: setup and monthly fees; amount of available storage space (you want at least 10 to 25MB to start as well as the option to add more space as your needs expand); and connection speed (some very low-budget hosts rely on slow 56K modems, while most business-level hosts have high-speed connections.
Comparing hosts is difficult, so a good policy is to quietly set up an account and test the host – kick the tyres, so to speak – for several weeks before announcing your presence to the world.
Isn’t that expensive?
Yes, but more expensive – and embarrassing – is to make a big push for traffic, only to have your host drop the ball and leave you with annoyed visitors who can’t quite make it in. Better to know your host is operating smoothly before inviting guests to the party.
Master of your domain
Before setting up your site, you also need to stake out your domain name. There’s wide agreement that nothing matters as much as a good name. Yet who would have thought Amazon was one? What most matters in a name is that it’s easy to spell and easy to remember.
For my money, that’s an argument against using a catchy name with an unorthodox country code suffix. Most computer users automatically type “co.za” “com”, or “net”. Throw a weird ending at them, and you may lose them. So I would recommend a clunky name with a “com” or “net” ending over a catchy name with an unorthodox ending.
Search engine listing
Just about every search engine provides tools for easy registration of new sites. Just look for an “Add URL” or “Add Site” button, and then follow the directions (ordinarily no more complex than typing in the address and hitting “Send”).
There are hundreds of search engines to choose from. But there’s little value in being on an index no one uses, which is why e-tailers should focus on a handful of high-traffic engines. The leading search destination is Google.
What will lure visitors to a site? Winning visitors becomes a matter of creative, persistent marketing. And the good news is that it’s still the little things that will bring plenty of traffic your way. There are fundamental steps that too many businesses neglect. For instance?
“You should always put your URL and a reason to visit your Website on your business cards”, says Larry Chase, publisher of Web Digest for Marketers, a weekly e-mail newsletter that delivers short reviews of marketing-oriented sites. “I call this cyberbait. For example, you should mention what people will get when they visit the site, such as a newsletter or a list of ‘Top 10 Tips’. That substantially increases visitors and eventually customers or subscribers.”
An e-mail signature is an especially powerful – and absolutely free – tool. Create a signature with a link to your website in it and have it automatically attached to every one of your outgoing e-mails. If your e-mail recipients click on the link, they’ll be taken to your site.
It only takes a few seconds to create an e-mail signature, and it’ll bring in visitors to your site every day. Another low-cost traffic builder: “Get active in online discussion groups and chats, and, where appropriate, give out your URL,” says Shannon Kinnard, author of Marketing with E-Mail.
Sell organic products? Scout out the many groups that focus on organic food and get active. A good place to find groups is at Google Groups which archives discussion lists. Getting active in these groups spreads the word about you and your site and you’ll get traffic coming to you. Another big-time traffic builder for any website that retails is posting items for sale on the major auction sites, such as Bid or Buy.
Renew domain names each year
Many people do not realise that domain names (also known as URLs) must be renewed each year. If you failed to renew the domain this could be the reason that someone else has your domain address.
When registering a new domain name ensure that you have registered domain names that not only incorporate your trading names, but also your trade marks. Once you have registered your domain names do not forget to renew them every year. Failure to pay the annual renewal fee can result in your domain names being deleted.
What happens if a domain registration is allowed to expire?
One week into the redemption period, the expired domain is put into a 10-day domain auction, allowing prospective registrants to bid on the domain. The winner of the auction obtains the domain registration ownership two weeks after the auction end date if the original owner fails to renew the domain by the end of the redemption period?
Is there a grace period?
The redemption grace period allows the name to be held for a 30-day period during which the original domain registrant may retrieve the name (for an additional fee) by contacting the domain registrar.
Don’t forget to register the domain name in your own name
Be careful to make sure that your domain name is registered in your own name and not under the web designer or technical support person’s details. Some service providers use their own contact details and this can cause problems later if you need to move the domain or a dispute arises on the right of use for the domain name.
Do a whois on a domain name to ensure that it hasn’t been registered. Then look for the date of the domain name.
There are other situations that can lead to a domain name dispute:
- Typosquatting: If a person manipulates the spelling of a name and registers it. This is usually done when playing on popular brand names. E.g. www.planetexcercise.co.za could be registered as www.planetxcercise.co.za
- Cybersquatting: Sometimes a person registers a domain name of a well-known company before they have had a chance to register it. In bad faith, they then sell it back to the rightful owner.
How to deal with disputes
- ICANN handle dispute proceeding for .com, .org and .net. You can find a list of ICANN dispute resolution bodies at the ICANN website here.
- The .co.za domain in South Africa is Uniform. Visit their web site at http://co.za for information with regard to proceeding with a dispute.
- The ZA Domain Name Dispute Resolution Regulations (ZADRR) permits complainants to file a dispute with a dispute resolution service provider for .co.za domains, specifying, the domain name in question; the respondent or holder of the domain name; the registrar or registry with whom the domain name was registered and the grounds for the dispute. Such grounds include reasons why the domain name registration constitutes an abusive or offensive registration.
- ZADRR complaint is much faster than normal litigation in the courts. A domain name case filed with the South African Institute of Intellectual Property Law (SAIIPL) is normally concluded within two months, using on-line procedures
Providing a Service
Providing great customer service
E-tailers used to be innocents who thought that with web-based retailing, all customer service would be a thing of the past with the entire sales and service process becoming neatly (and oh, so inexpensively) automated. Ha! If there’s a mantra for e-commerce players, it’s this: Customers may be virtual, but their money is real.
How to provide the best online service possible? Just follow the leaders:
- Anticipate questions. Many e-tailers anticipate questions and then answer them in their FAQs. This will save you and your customer’s time. Of course, sometimes customers will e-mail you with questions, and this can be a good thing. Get lots of e-mail complaining about a certain feature that the customer has simply misunderstood or bemoaning the lack of a particular product that you know is in stock, and you are learning important things about how your site is failing to communicate to visitors.
- Stay in touch. At Hewlett Packard’s hpshopping.com, every customer is asked if he would recommend hp-shopping to friends, and 88% say they would. But the small percentages who say “no” aren’t forgotten. Just contacting them alone is often enough to win them back.
- Respond quickly. The web is an instant medium – except when it comes to getting responses from many businesses that seem to route incoming e-mail into a folder labelled “Ignore Forever.” Smart e-tailers know better, however. With a small staff, you might find a 24-hour standard to be enough of a challenge. But monitor customers. If they demand a faster response, somehow you have to find a way to meet their needs.
- Hold their hands. Online, not every customer knows how to shop, and you have to be ready to help them buy. No brick-and-mortar retailer has to teach customers how to buy, but online, that remains a thorny problem. Every day thousands of shoppers log on for the first time, and these newbie’s genuinely crave handholding as they make purchases. Understand that and be ready to help. Be patient, too.
- Use cut and paste. Canned responses – cut-and-paste scripts – are used by all the leading sites, which track questions, hunt for the most asked, and produce templates for their representatives. You can do likewise. As you answer customer questions, file away your responses. Odds are, you’ll be asked the same question within the week, and it’s a great labour saver to have an answer ready.
- Stay sensitive. A worry with e-mail: It’s easy to seem cold and unresponsive in the formality of the written word. Read and re-read your responses before they go out. You want to be – and appear–interested in the customer’s issues and eager to find solutions.
- Offer choices. It’s important that you offer a variety of choices that customers can use to contact you, such as e-mail and phone. The easier the online shopping experience, the more likely the customer will come back for more.
These steps will get you started delivering better customer service, but they’re not enough. Successful entrepreneurs say that the only way to do online service right is to have the right attitude, really believe the customer is king, and make sure that every one of their customer service reps know it.
Many fail on this score, but when you’ve made customer service your top and continuing priority, success is within reach.
Here’s the blunt truth about e-commerce: Most of what you want to know will not be in books or even in magazines and newspapers. This industry is exploding so fast that the only medium that is successfully tracking developments is the Web itself.
When you want to know more, or need answers to questions, log onto the Web and go searching. The information you crave is rarely more than a few mouse clicks away.
Showcasing your Brand
How to create awareness and generate traffic to an online business
Regardless of the theme of a website (such as a niche site aimed at sufferers of diabetics), the concept of creating awareness for any website follows the same principals.
Offer something that no one else does or can. To achieve this you will have to visit similar social networks do as much research into what they offer and then determine how you can be different.
Viral marketing campaigns
Viral marketing offers advertisers a way to reach a large audience at a relatively low cost to other marketing channels, but it is very dependant on engaging with people and grabbing their attention.
How does a viral campaign work?
Viral marketing and viral advertising refer to techniques that use pre-existing social networks to produce increases in brand awareness. To explain in non-technical language, viral marketing is the same as “word-of-mouth advertising or leveraging the media” in off online marketing campaigns.
- Viral marketing is powerful tool and these are a few of the strategies that are used:
- Give away products or services. “Free” is the one of the most powerful words in a viral vocabulary – free e-mail services, free information and so on.
- Launch regular Podcasts that are free to subscribe to that offer regular and useful information and help to your readers.
- Offer a prize in a competition in return for having access to the entrant’s details
- Referral Incentives using Email / SMS messaging platforms
- You Tube Videos can drive a huge amount of visitors to the website
- Create social networking applications on FaceBook, Twitter and MySpace
- Other Marketing Methods
- Take advantage of others’ resources
The most creative viral marketing plans use others’ resources to get the word out there. Affiliate programs, for example, place text or graphic links on others’ websites.
Buzz marketing can be powerful
Buzz marketing is another technique that can be affectively used to make each encounter with a browser appears to be a unique, spontaneous personal exchange of information instead of a calculated marketing pitch. Buzz campaigns are run through chat rooms in order to reach a target audience; personal blogs are another popular vehicle for electronic buzz marketing campaigns
How to generate revenue and content
Finding good content for your site
Sharing content online is one of the fastest growing trends on the worldwide web. RSS (Really Simple Syndication) is a free content feed system that provides headlines, blurbs and links to the most recently published articles on this website.
With the FIFA World Cup knocking on the door, there is no storage of topics to cover. Consider hiring a writer to help you write and prepare the content. If you want more that RSS content then review web sites which offer a similar subject to yours, but larger in user base and overall site traffic.
With clever search engine use, you can easily find out what methods they are using to syndicate their content. You can use this information to develop your own plan of attack.
How to generate revenue
If you own a website, there’s a variety of things you can do to generate extra income to run the site.
One of the easiest ways to earn money from your website is to add Google AdSense to the site. Sign up for an account, and add it to your website where you want AdSense to appear. How Google AdSense generates earnings is that it places Google advertisers on your site and you simply take a percentage of the click-through revenues. Visit their website for full details.
Banner advertising is one of the most popular and effective ways to maximise profits. It is the same as selling advertising space on your website. If you want to make additional money, sell sponsor ads and place them is a special section or towards the top of your website for the most exposure. Many businesses will pay for leads/sales that you direct to their sites as well.
Selling products or services through the website can generate good income. Of course, they should be related to your target audience. If you go this route, you will have to arrange that the have the facility to securely accept credit card payments directly from your website.
Fee based membership websites are those that require users to pay for a membership in order to access content. This only works if you have content that people want or must have.
According to the Department of Sport and Recreation, a recent study on sport sponsorship in South Africa shows that the industry is vibrant and growing. Sponsors continue to view soccer, rugby and cricket as those that offer the best exposure value.
To find sponsorship find out who are the decision makers for the companies you want to approach and either call or even better get actual “face” time with them. Identify the companies that would be most interested in supporting your type of business. Seek companies committed to youth ventures (especially in your community) as well as companies that might have an interest in the business you are developing.
Getting the help you need to write a business plan
Most website publishers, especially those who are new to the industry, create a website without a business plan. The golden rule, that one should never start a business without a plan, still applies. The reason − a business plan gives you focus. If you lose focus, you can end up with a website that is too generalised for the target market.
When you write down your vision and goals for the business plan, make sure that you also outline steps to reach them. A business plan helps you to manage the finances better as well. The business plan should include your start-up costs, as well as your monthly and yearly expenses.
You can get help in order to write a business plan, but don’t get someone to write it for you. Creating your business plan is an important exercise for you to go through because it forces you to think about many issues you have to face starting a business of this nature, i.e. position in the market, competition, development and maintenance, technology, pricing, risks you may face, and ultimately your profitability.
How much capital is needed to set up an online website?
The cost of developing a website, whether it be R3 500 or R20 000, is not a sensible way to choose a web developer. It doesn’t matter if the developer is small one-man operation or a huge established developer. What matters is that the developer provides your business what you need and that the site will easily adjust and keep abreast of rapidly changing developments in the world of IT in a cost effective way.
The process of web site development can be divided into different life cycles:
- Spec Phase
- Testing and Delivery
Step 1: Planning
Many things need to be taken into consideration when designing a site.
- Decide what is the purpose of the site? Do you want to provide information, promote a service, sell a product, in your case, it would be to sell a product.
- What are your goals? What do you hope to achieve by building this web site? Common goals include the sharing of information, making money or a reservation service and so on.
- Decide on the target audience. Do this by gathering information such as age, sex educational background and interests – this will help to choose the best design style for your site.
- What kind of information will the audience be looking for on your site? Are they looking for specific products?
During this phase, the web designer will recommend what technologies should be implemented. Elements such as interactive forms, ecommerce, flash, etc. are discussed when planning your web site.
Remember, you don’t want to find later on that because your research and more importantly, the specs given to the web designer were inadequate, you have to find more money to improve the site because you didn’t consider certain growth areas right in the beginning.
Step 2: Spec phase
The most important phase of web development. The Spec Phase is used for the technical discipline of organising website content. This provides a guide as to what features you need on the site, and is essential to developing a consistent, easy to understand navigational system.
Think about menus you need and whether you need ecommerce applications, video, pod casts, blogs or forums. The Spec Phase is similar to the information an architect needs to gather in order to draw to build a house or office block.
Step 3: Design
This is the stage where you determine the look and feel of the site. Target audience is one of the key factors that must be carefully thought out because the design is what the browser will see. This is where you would incorporate elements such as the company logo or colours to help strengthen the identity of the company on the web site. It must be user friendly and easy to follow.
Step 4: Development
The development stage looks at the back end – the engine of the website. This is the stage where all of the features and functionality are pulled together and made to work.
The development will also apply to design of the site (fonts, colours, overall design theme and other elements) to ensure the ‘front end’ – the component of the site that is visible to the browsers, is in line with the design that was approved in Step 3.
Before you begin development, do your research on which operational platforms will be best suited to your site.
Typical ASP language (ASP.NET is a web application framework that allows programmers to build dynamic sites), is more expensive to build and upgrade compared to open PHP language. (PHP – Hypertext Pre-processor is a widely used, general-purpose scripting language designed for web development).
Another option that circumvents development include off-the-shelf website solutions. These are website packages (often DIY solutions) available online.
This type of infrastructure can dramatically lower costs. A Google search will turn up hundreds of options. If you are building an ecommerce site you will need to research electronic payment gateways carefully. These include Paypal (FNB is SA facilitator of local Paypal payments) or Standard Bank’s Mimoney. Decide which is best suited to your business.
Step 5: Testing & Delivery
At this point, the web designer will attend to the final details and test the web site. They will test things such as the complete functionality of forms or other scripts, as well last testing for last minute compatibility issues.
Step 6: Maintenance
Who will update the site? By now, the site should be up and ready. Most web designers will continue to update the information on the site. Some offer maintenance packages based on how often you want to make changes or additions.
You can choose to do changes yourself. A web site driven by a Content Management System (CMS) gives you the ability to edit the content areas of the web site yourself. You are given access to a back-end administrative area, where you can use an online text editor.
Free vs. paid hosting, which is better?
When it comes to hosting your website, there are two kinds of web hosting options:
- A free web host
- Commercial web hosting solution
Free web hosts
If you don’t want your website to disappear get your own domain name. This will protect you to a small degree if your host closes down. If you choose the free web host understand that there will be advertising on your site.
To host your site, the company you have chosen has to bear certain costs – the cost of leasing the web server, the cost of the bandwidth that your site uses, etc. If they’re not earning from advertising, find out how they financing the service before you commit.
Pointers for assessing free web hosting:
- Reliability and speed of access: Find out our reliable the service is and how fast users have with regard to access
- Amount of web space: Think about how much space you will need. Needs vary, depending on how many pictures your pages use, whether you need sound files, video clips, etc.
- File type and size limitations: Some free hosts impose a maximum size on each file you upload
Bandwidth allotment. Many free web hosts impose a limit on the amount of traffic your website can use per day and per month. Check if the host you have chosen has limitation and what they are.
Commercial Web Hosting:
If you decide to go with a service that charges a month fee then it’s vital to check:
- Reliability and speed of access: The web hosting provider should have a redundant connection of at least 1 GBit.
- Data Transfer (Traffic/Bandwidth): Data transfer is the amount of data that is transferred between your site and your visitor’s browser. If the file size of a page on your website is 20KB and the page also makes use of two 10KB images, then every visitor to the page will download 40KB of data. As a rough guide, 1GB of data transfer a month is about 20,000 page views a month.
- Disk space: Disk space ensures your website’s location on the net while data transfer fuels its availability online. With an insufficient data transfer quota your website will not show up online which is why you should be very careful when searching for the right website hosting provider.
- Technical support: The availability of round-the-clock technical support and services are most definitely the most important parts of business websites by many firms.
- SSL (secure server): You will definitely need SSL if you want to collect credit card payments on your site or if you want to run a shopping cart system to conduct your business.
- Server: Servers can crash. You must understand what will happen to your content if the server fails. If you have everything stored on your hard disk (which is the case for many static
- Email: If you want to have email addresses at your own domain, like firstname.lastname@example.org, make sure that the host you choose can provide this package.
How to get a list of web developers in South Africa?
The best route is to rely on word of mouth.
One of the easiest ways to do this is to find websites that you believe to be good and contact their owners for word-of-mouth referrals. There are also a number of directories on the web and you can select a suitable firm through any of the South African Web Site Designer Directories.
Start by browsing through the directories and then select the appropriate specialty and geographical area that suits your needs. Select a few companies and contact them. See what services they offer for what they charge.
Explain your requirements to them and find out exactly what website design, graphics, database programming, search engine optimisation and hosting you need.When you choose a company, be sure to get in to get what ever you have decided on in writing and don’t forget to set deadlines. These must also be in writing
How Do I Start A Transport Or Logistics Business?
An all in one guide to starting a transport and logistics business.
Thinking about starting a transport business?
Forecasts indicate that the demand for freight transport will grow in South Africa by between 200% and 250% over the 15 to 20 years.
Some corridors, (high volume transport routes that connect major centres), such as the corridors between Gauteng and Cape Town (which amount to 50% of all corridor transport) will increase even faster.
The scope in the transport and logistics industry is varied – from a one-man show using a small truck to transport goods and offer services, to a fleet of transport vehicles which travel the length and breadth of South Africa’s roads.
Road transportation includes commuter transport from taxis to bus transportation.
It can be a tough industry and there are many threats facing transport businesses but if you get it right, you can build a successful business.
What is covered in this guide:
- How to start your transport and logistics business
- How to get funding for your transport business
- What are the costs involved
- Finding customers and getting transport contracts
- Getting onto suppliers lists
- Buying trucks and employing drivers
- What are the regulations and risks
- Where to find guidance to start your business.
Ready to get going? Click the arrow button to learn how to start your own transport business.
How To Start A Farming Business
Keep these nine points in mind when launching your new farming business.
How does one go about starting a distribution business? Or how do you become a seller for an international company locally (SA)?
How to register an international product nationally.
If you already have a particular product you are thinking of distributing, your best option would be to contact that company and find out what the requirements are to distribute their products. Each company will have different criteria.
Here is some advice however on starting a wholesale distribution business:
So you want to start a wholesale distributorship. Whether you’re currently a white-collar professional, a manager worried about being downsized, or bored with your current job, this may be the right business for you. Much like the merchant traders of the 18th century, you’ll be trading goods for profit.
And while the romantic notion of standing on a dock in the dead of night haggling over a tea shipment may be a bit far-fetched, the modern-day wholesale distributor evolved from those hardy traders who bought and sold goods hundreds of years ago.
The Distributor’s Role
As you probably know, manufacturers produce products and retailers sell them to end users. A can of motor oil, for example, is manufactured and packaged, then sold to automobile owners through retail outlets and/or repair shops.
In between, however, there are a few key operators-also known as distributors-that serve to move the product from manufacturer to market. Some are retail distributors, the kind that sell directly to consumers (end users).
Others are known as merchant wholesale distributors; they buy products from the manufacturer or other source, then move them from their warehouses to companies that either want to resell the products to end users or use them in their own operations.
Three types of operations can perform the functions of wholesale trade: wholesale distributors; manufacturers’ sales branches and offices; and agents, brokers and commission agents. As a wholesale distributor, you will probably run an independently owned and operated firm that buys and sells products of which you have taken ownership.
Generally, such operations are run from one or more warehouses where inventory goods are received and later shipped to customers.
Put simply, as the owner of a wholesale distributorship, you will be buying goods to sell at a profit, much like a retailer would. The only difference is that you’ll be working in a business-to-business realm by selling to retail companies and other wholesale firms like your own, and not to the buying public.
This is, however, somewhat of a traditional definition. The traditional wholesale distributor is still the one who buys “from the source” and sells to a reseller.
Getting Into the Game
The field of wholesale distribution is a true buying and selling game-one that requires good negotiation skills, a nose for sniffing out the next “hot” item in your particular category, and keen salesmanship. The idea is to buy the product at a low price, then make a profit by tacking on an amount that still makes the deal attractive to your customer.
Experts agree that to succeed in the wholesale distribution business, an individual should possess a varied job background. Most experts feel a sales background is necessary, as are the “people skills” that go with being an outside salesperson who hits the streets and/or picks up the phone and goes on a cold-calling spree to search for new customers.
In addition to sales skills, the owner of a new wholesale distribution company will need the operational skills necessary for running such a company. For example, finance and business management skills and experience are necessary, as is the ability to handle the “back end” (those activities that go on behind the scenes, like warehouse setup and organization, shipping and receiving, customer service, etc.).
Of course, these back-end functions can also be handled by employees with experience in these areas if your budget allows.
Setting Up Shop
When it comes to setting up shop, your needs will vary according to what type of product you choose to specialize in. Someone could conceivably run a successful wholesale distribution business from their home, but storage needs would eventually hamper the company’s success.
For entrepreneurs looking to start their own wholesale distributorship, there are basically three avenues to choose from: buy an existing business, start from scratch or buy into a business opportunity. Buying an existing business can be costly and may even be risky, depending on the level of success and reputation of the distributorship you want to buy.
The positive side of buying a business is that you can probably tap into the seller’s knowledge bank, and you may even inherit his or her existing client base, which could prove extremely valuable.
The second option, starting from scratch, can also be costly, but it allows for a true “make or break it yourself” scenario that is guaranteed not to be preceded by an existing owner’s reputation. On the downside, you will be building a reputation from scratch, which means lots of sales and marketing for at least the first two years or until your client base is large enough to reach critical mass.
The last option is perhaps the most risky, as all business opportunities must be thoroughly explored before any money or precious time is invested. However, the right opportunity can mean support, training and quick success if the originating company has already proven itself to be profitable, reputable and durable.
During the startup process, you’ll also need to assess your own financial situation and decide if you’re going to start your business on a full- or part-time basis. A full-time commitment probably means quicker success, mainly because you will be devoting all your time to the new company’s success.
Like most startups, the average wholesale distributor will need to be in business two to five years to be profitable. There are exceptions, of course. Take, for example, the ambitious entrepreneur who sets up his garage as a warehouse to stock full of small hand tools.
Using his own vehicle and relying on the low overhead that his home provides, he could conceivably start making money within six to 12 months.
A wholesale distributor’s initial steps when venturing into the entrepreneurial landscape include defining a customer base and locating reliable sources of product. The latter will soon become commonly known as your “vendors” or “suppliers.”
The cornerstone of every distribution cycle, however, is the basic flow of product from manufacturer to distributor to customer. As a wholesale distributor, your position on that supply chain (a supply chain is a set of resources and processes that begins with the sourcing of raw material and extends through the delivery of items to the final consumer) will involve matching up the manufacturer and customer by obtaining quality products at a reasonable price and then selling them to the companies that need them.
In its simplest form, distribution means purchasing a product from a source-usually a manufacturer, but sometimes another distributor-and selling it to your customer. As a wholesale distributor, you will specialize in selling to customers-and even other distributors-who are in the business of selling to end users (usually the general public).
It’s one of the purest examples of the business-to-business function, as opposed to a business-to-consumer function, in which companies sell to the general public.
Weighing It Out: Operating Costs
No two distribution companies are alike, and each has its own unique needs. The entrepreneur who is selling closeout T-shirts from his basement, for example, has very different startup financial needs than the one selling power tools from a warehouse in the middle of an industrial park.
Regardless of where a distributor sets up shop, some basic operating costs apply across the board. For starters, necessities like office space, a telephone, fax machine and personal computer will make up the core of your business. This means an office rental fee if you’re working from anywhere but home, a telephone bill and ISP fees for getting on the internet.
No matter what type of products you plan to carry, you’ll need some type of warehouse or storage space in which to store them; this means a leasing fee. Remember that if you lease a warehouse that has room for office space, you can combine both on one bill. If you’re delivering locally, you’ll also need an adequate vehicle to get around in.
The Day-to-Day Routine
Like many other businesses, wholesale distributors perform sales and marketing, accounting, shipping and receiving, and customer service functions on a daily basis.
They also handle tasks like contacting existing and prospective customers, processing orders, supporting customers who need help with problems that may crop up, and doing market research (for example, who better than the “in the trenches” distributor to find out if a manufacturer’s new product will be viable in a particular market?).
To handle all these tasks and whatever else may come their way during the course of the day, most distributors rely on specialized software packages that tackle such functions as inventory control, shipping and receiving, accounting, client management, and bar-coding.
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